Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain, but lasts much longer than the other. Gateway's discount rate is 9%. It plans to continue with one of the two models for the foreseeable future. Based on the equivalent annual costs of each, shown below, which should it choose? [Note: I have tried to make it easier for you to solve this problem. You do not need to do extra, unnecessary calculations merely to show me your work.] Model Year 0 $0 $0 Year 1 -$23 -$21 Year 2 Year 3 Year 4 -$23 -$21 Year 5 Year 6 Old R S &S -$23 -$21 -$23 -$21 -$23 -$23 Which bus should Gateway Tours choose? Give me the name of the bus that should be chosen, and the final numbers that justify your answer. Do not explain any concepts - I'm looking for an answer along the lines of "Choose because $ is better than $ [I'm sorry if the columns don't line up perfectly. Old R. is a 6 year project, and S&S is a 4 year project.] B I S I X, Insert Formula

Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain, but lasts much longer than the other. Gateway's discount rate is 9%. It plans to continue with one of the two models for the foreseeable future. Based on the equivalent annual costs of each, shown below, which should it choose? [Note: I have tried to make it easier for you to solve this problem. You do not need to do extra, unnecessary calculations merely to show me your work.] Model Year 0 $0 $0 Year 1 -$23 -$21 Year 2 Year 3 Year 4 -$23 -$21 Year 5 Year 6 Old R S &S -$23 -$21 -$23 -$21 -$23 -$23 Which bus should Gateway Tours choose? Give me the name of the bus that should be chosen, and the final numbers that justify your answer. Do not explain any concepts - I'm looking for an answer along the lines of "Choose because $ is better than $ [I'm sorry if the columns don't line up perfectly. Old R. is a 6 year project, and S&S is a 4 year project.] B I S I X, Insert Formula

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Its discount rate is 10.8%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? (Note: dollar amounts are in thousands.) Model Old Reliable Short and Sweet Year 0 - $199 - $98 Year 1 - $3.9 -$2.1 Year 2 - $3.9 -$2.1 Year 3 -$3.9 -$2.1 Year 4 -$3.9 -$2.1 Year 5 -$3.9 Year 6 - $3.9 Year 7 - $3.9 Based on the costs of each model, which should it choose? (Select the best choice below.) OA. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. B. Gateway Tours should choose Old Reliable because it lasts longer. OC. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller. OD. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller.

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